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Which of the Following Explains, at Least in Part, Why

Question 49

Multiple Choice

Which of the following explains, at least in part, why it is difficult to predict how far an IS curve will shift in response to a change in tax policy? A change in tax policy


A) works by changing disposable income and thus indirectly personal consumption; the link between income and consumption is uncertain.
B) generates a response that depends on the uncertain perception of the permanence of the change.
C) implies a change in the government's intertemporal budget constraint and its future need for revenue; people with different perceptions of that need react differently to a tax change.
D) creates an uncertain shift in an IS curve for all these reasons.
E) none of the above.

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